Business Confidence In Australia Rises

The National Australia Bank (not to be confused with the Reserve Bank of Australia, the central bank) publishes monthly indicators of business confidence and current conditions in business together with the data on business opinions of trading conditions, profitability, employment, forward orders, inventories, labor costs, purchases cost, prices, capacity utilization and exports.

Business confidence rose to a percent balance of 19.4% in February from 15.0% in January. It has recovered from the dip in December and is now close to the peak levels of the past as can be seen in the attached chart. The loss of confidence in December may have been due, in part, to the three 25 basis points rises in the central bank's policy rate that took place in October, November and December. Apparently, the business community has come to realize that increases in the cash rate are appropriate given the pace of Australian economic activity. A fourth rise 25 basis points to 4.0% in the cash rate took place on March 2 did not weaken confidence. The favorable balance of opinion about current conditions is up to 7.7% from 3.0% in January but it remains well below previous peaks.

The Australian economy is benefitting from the rise in activity among the emerging countries of the pacific region. China is now the single, largest recipient of Australia's exports. Ten years ago in 1999, China accounted for 4.7% of Australia's exports; in 2009 it accounted for 21.6% .